In Brief
A transport company contracted to deliver cement for an industrial client. Since it owned no trucks, it hired them from various operators on a per-delivery basis and paid freight charges. The tax authority treated each hired truck as creating a separate sub-contractor relationship requiring tax deduction at source (TDS) on payments exceeding Rs. 20,000. The company failed to deduct TDS. The Supreme Court upheld the disallowance of Rs. 57.11 lakhs under Section 40(a)(ia) of the Income Tax Act, holding that: (1) each truck hire created a binding contract making the operator a sub-contractor; (2) TDS obligations are mandatory regardless of practical difficulties; and (3) the disallowance applies equally to paid and payable amounts, not just outstanding liabilities.
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